Project management a managerial approach 5th by merdedith

J A C K R . MEREDITH

SAMUEL J . MANTEL, J R .

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PROJECT
MANAGEMENT
A MANAGERIAL APPROACH
Fifth Edition


Jack R. Meredith
Broyhill Distinguished Scholar and Chair in Operations
Babcock Graduate School of Management
Wake Forest University

Samuel J. Mantel, Jr.
Joseph S. Stern Professor Emeritus of Operations Management
University of Cincinnati

John Wiley & Sons, Inc.


To Avery and Mitchell,
from "papajack. "

J. R. M.
To the new members of the cast, in the order of their appearance:
Natalie, Rachel, Rivkah, Tyler, Kyle, Ryan,
Alison, Alexandra, Caroline, and Preston, with love.
S. J. M., Jr.

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Library of Congress Cataloging-in-PublicationData
Meredith, Jack R.
Project management : a managerial approach / Jack R. Meredith, Samuel J. Mantel, Jr.5th ed.
p. cm.

Includes index.
ISBN 0-471-07323-7 (cloth : alk. paper)
1. Project management. I. Mantel, Samuel J. 11. Title.

ISBN 0-471-07323-7
WIE ISBN: 0-47 1-42907-4
Printed in the United States of America


Preface

3 APPROACH
The use of projects and project management continues to grow in our society and its
organizations. We are able to achieve goals through project organization that could be
achieved only with the greatest of difficulty if organized in traditional ways. Though
project management has existed since before the days of the great pyramids, it has enjoyed a surge of popularity beginning in the 1960s. A project put U.S. astronaut Neil
Armstrong on the moon. A project named "Desert Storm" freed the nation of Kuwait.
An annual project brings us Girl Scout cookies as a sign that winter is just about finished. The use of project management to accomplish the many and diverse aims of society's varied organizations continues to grow.
Businesses regularly use project management to accomplish unique outcomes
with limited resources under critical time constraints. In the service sector of the
economy, tlie use of project management to achieve an organization's goals is even
more common. Advertising campaigns, voter registration drives, political campaigns,
a family's annual summer vacation, and even management seminars on the subject of
project management are organized as projects. A relatively new growth area in the use
of project management is the use of projects as a way of accomplishing organizational reorganization and change. Indeed, there is a rapid increase in the number of
firms that use projects as the preferred way of accomplishing almost everything they
undertake. Not even the most optimistic prognosticators foresaw the explosive growth
that has occurred in the field.
As the field has grown, so has its literature. There are "cookbooks" that describe in
detail the specific steps required to carry out a project, but they do not address the whys

nor do they usually discuss how and why the parts fit together. Another type of book focuses on scheduling networks. These are quite helpful for scheduling, but scheduling is
only one of the serious problems a project manager must face. There are books, seemingly dozens of them, that "talk about" project management-but only occasionally
about how to manage a project. There are books on earned value calculations, cost estimating, team building, purchasing, project management software, leadership, planning


iv

PREFACE

IT projects, and similar specialized or subspecialized subjects. These are valuable for
experienced project managers who can profit from an advanced education in specific
areas of knowledge, but one cannot learn to manage projects from these specialized
sources. There are also handbooks-collections of articles written mainly by academics
and consultants on selected topics of interest to project managers. Handbooks do not,
nor do they pretend to, offer broad coverage of the things project managers need to
know. Once the project manager has been educated on the basics of project management, these handbooks often represent valuable collections of relevant readings.
Unfortunately, project management seems to be reentering a stage that we thought
had passed-arguments within the profession (and among those who teach it) about
what we really need to know to manage projects. Must we know "how to manage people" or "how to use computers and do quantitative methods"? Lately we have been receiving email from teachers such as the one who urged us to drop "all the m a t h and pay
more attention to conflict resolution, and another who suggested that we cut back on the
"touchy-feely stuff and stick with the important things like scheduling and budgeting."
We believe that insight into human behavior, knowledge of organizational issues, and
skill with certain quantitative methods are all necessary (though not necessarily sufficient) for successful project management. This book reflects that belief.
It addresses project management from a management perspective rather than a
cookbook, special area treatise, or collection of loosely associated articles. Such a
book should address the basic nature of managing all types of projects-public, business, engineering, information systems, and so on-as well as the specific techniques
and insights required to carry out this unique way of getting things done. It should
deal with the problems of selecting projects, initiating them, and operating and controlling them. It should discuss the demands made on the project manager and the nature of the manager's interaction with the rest of the parent organization. The book
should cover the difficult problems associated with conducting a project using people
and organizations that represent different cultures and may be separated by considerable distances. Finally, it should even cover the issues arising when the decision is

made to terminate a project.
This managerial perspective is the view we have taken here. As we noted earlier, we
are occasionally advised to "cut the BS," apparently a reference to any aspect of project
management that is not mathematical, technical, or governed by strict rules of procedure. The argument is that "management is just common sense." It is quite possible that
such a statement is true, but if so, the word "common" is used in the sense of "common
carrier9'-something available to everyone. Sadly, everyone does not seem to have managerial common sense. If everyone did, there would be no market for Scott Adam's Dilber-t-selected illustrations of which are reproduced here where appropriate.
The book is primarily intended for use as a college textbook for teaching project
management at the advanced undergraduate or master's level. The book is also intended for current and prospective project managers who wish to share our insights
and ideas about the field. We have drawn freely on our personal experiences working
with project managers and on the experience of friends and colleagues who have
spent much of their working lives serving as project managers in what they like to call
the "real world." Thus, in contrast to the books described earlier about project management, this book teaches students how to do project management.


1

PREFACE

v

As well as being a text that is equally appropriate for classes on the management
of service, product, or engineering projects, we have found that information systems
(IS) students in our classes find the material particularly helpful for managing their
IS projects. Thus, we have included some coverage of material concerning information systems and how IS projects differ from and are similar to regular business
projects.

/

/IORGANIZATION AND CONTENT
Given this managerial perspective, we have arranged the book to use the project life

cycle as the primary organizational guideline. We have found it to be a comfortable
framework for the reader. Following an introductory chapter that comments on the
role and importance of projects in our society and discusses project management as a
potential career for aspiring managers, the book covers the major events and issues
arising during the management of projects in the order in which they usually occur in
the life of a project. Part I, Project Initiation describes how projects are selected for
implementation. It also covers the role of the project manager, the various ways that
projects can be organized, and the special requirements for managing a cross-cultural
project. This is followed by a description of the project planning process and some
tools used in project planning. Part I concludes with a topic of major importance to
the project manager: negotiation.
Project budgeting, scheduling, resource allocation, monitoring/information
systems, and controlling are then discussed in Part II, Project Implementation. Finally,
Part III, Project Termination concludes the discussion with a description of project auditing and termination. The book ends with an epilogue that comments on our ideas
about the state of the field and notes three fundamental problems that must be solved if
project management is to progress beyond its current state of sophistication.
We have relegated the discussion of two important aspects of projects that usually
occur very early in the project life cycle-creativitylidea generation and technological forecasting-to the book's website. Although few project managers engage in either of these tasks (typically being appointed to project leadership after these activities have taken place), we believe that a knowledge of these subjects will make the
project manager more effective.
Any way chosen to organize knowledge carries with it an implication of neatness
and order that rarely occurs in reality. We are quite aware that projects almost never
proceed in an orderly, linear way through the stages and events we describe here. The
need to deal with change and uncertainty is a constant task for the project manager.
We have tried to reflect this in repeated references to the organizational, interpersonal, economic, and technical glitches that create crises in the life cycle of every
project, and thus in the life of every project manager.
Finally, although we use a life-cycle approach to organization, the chapters include material concerning the major areas of the Project Management Body of Knowledge (PMBOK) as defined by the Project Management Institute. (See Bibliography
for Chapter 1.) Anyone wishing to prepare thoroughly in some of these areas may
have to go beyond the information covered in this text.

vi

PREFACE

PEDAGOGY
Because this book is primarily a textbook, we have included numerous pedagogical
aids to foster this purpose. As in earlier editions, short summaries appear at the end of
the text of each chapter, followed by glossaries defining key terms and concepts introduced in the chapter. End-of-chapter materials also include review questions and
problems revisiting the materials covered in the chapter. The answers (though not the
detailed solutions) to the even-numbered problems are on the book's Web site. There
are also sets of conceptual discussion questions intended to broaden the students' perspectives and to force them to think beyond the chapter materials to its implications.
Finally, there are questions covering the Project Management in Practice application
examples located throughout the chapters.
As in the past, we include incidentsfor discussion, which are brief "caselettes" oriented primarily toward the specific subjects covered in the chapter, but sometimes allow
use of materials and concepts covered in earlier chapters. And at the end of each chapter
we offer a reading and/or a case, with questions concerning the reading and/or case at the
end. In the fourth edition, we removed many of the "major" cases from the book and inserted them in the Instructor's Manual and on the book's Web site. Teachers let us know,
in no uncertain terms, that these larger cases belonged in the book. We returned some of
them to the book and added a number of newer cases as well. Of course, many of the older
cases are still available in the Instructor's Manual and on the website. They are laid out to
facilitate copying, should the instructor wish to use them for class handouts and discussion.
We have made some assumptions about student and professional readers in writing this text. First, we assume that all readers have taken an elementary course in
management or have had equivalent experience. The reader with a background
in management theory or practice will note that many of the principles of good project management are also principles of good general administrative management.
Project management and administrative management are not entirely distinct. Further,
we assume that readers are familiar with the fundamental principles of accounting,
behavioral science, finance, and statistics as would be a typical manager. Because the
assumption concerning statistics is not always met, we include Appendix A on the
Web site ( on probability
and statistics serves as an initial tutorial or as a refresher for rusty knowledge.

WHAT'S NEW
In this fifth edition, we have made quite a few substantial changes, First, in line with
the trend in industry, we have taken a more strategic perspective of project management. Chapter 2 is now oriented toward using project selection as a major tool for
achieving the strategic objectives of the organization through what is called the Project Portfolio Process.
In addition, Chapter 8 (Scheduling) has been completely rewritten. Since all of
the easily available and inexpensive software uses activity-on-node (AON) notation,
we have given it prominence in Chapter 8. We continue, however, to teach both AOA
and AON and use whichever is most pedagogically helpful whenever networks are required. For example, we prefer AON for scheduling because network construction is


PREFACE

vii

simpler. On the other hand, we adopt AOA for teaching how projects are crashed
(Chapter 9) because AOA networks illustrate crashing more clearly.
Coverage of earned value analysis has been extended once again in Chapter 10
(Monitoring). In addition, a lengthy example has been added illustrating the calculation of earned value during the execution of a project. Substantial discussion of the
Project Management Office has been added to Chapter 4 (Project Organization) with
additional references to the Project Office appearing throughout the text.
We have also greatly expanded the coverage of risk management. The added emphasis on risk management is accompanied by a student version of Crystal all@ 2000,
an ~ x c e l @
add-in, that comes with the book. This software makes simulation reasonably
straightforward and not particularly complicated. Discussions of risk management are
scattered throughout the entire text, sometimesamounting to a few words and sometimes
to whole sections of a chapter. The use of simulation as a technique for risk analysis is
demonstrated in several ways in different chapters. (Because relatively few students are
familiar with simulation software, step-by-step instruction is included in the text.)
Microsoft projecta has become the dominant application software in the field,

outselling its closest competitor about 4 to 1. As with the last edition, a free 120-day
trial version of Microsoft Project Professional 2 0 0 2 ~is included on a CD in every
copy of the book. Our coverage of software tends, therefore, to be centered on Microsoft project' (and on Crystal all@), but includes a brief discussion of the many
"add-ons" that are now available to supplement Microsoft projectB and its competitors. Because the various versions of Microsoft projecta are quite similar in the way
that they perform most of the basic tasks of project management, we generally do not
differentiate between the versions, referring to any and all simply as Microsoft Project (MSP). We have also added some exercises to the end-of-chapter material that can
utilize computer software. Similar materials are also available on the website.
In the past, we grouped the Microsoft projectBand ~ x c e l @
printouts in one chapter.
This worked fine for those early, simple versions of project management software. However, as software capabilities expanded, it became necessary to illustrate them in the same
chapters where those capabilities were described. For example, when trying to understand a work breakdown structure, it is helpful to see the computer printout and to observe the assignment of WBS numbers as one develops the project plan. MSP and ~ x c e l @
printouts therefore now appear where they are relevant to the material being covered.
There is, of course, the danger that human nature, operating in its normal discreet
mode, will shift the task of learning project management to that of learning project
management software. Projects have often failed because the project manager started
managing the software instead of the project. Instructors need to be aware of the
problem and must caution students not to fall into this trap.

a

SUPPLEMENTS
The Instructor's Resource Guide on the CD-ROM provides additional assistance to the
project management instructor. In addition to the answers/solutions to the problems,
questions, readings, and cases, this edition includes teaching tips, a test bank, a
computerized test bank, and Power Point slides. The books' accompanying Web site
(n/college/project@MG) contains, given the password, the following valuable resources for the instructor: an electronic version of the Instructor's


viii

PREFACE

Resource Guide. In addition, the student Web site contains Web quizzes, and Appendix
A: Probability and Statistics and Appendix B: Answers to the Even-Numbered Problems, a glossary, and additional cases, topics, and incidents for discussion.

a

ACKNOWLEDGMENTS
We owe a debt of gratitude to all those who have helped us with this book. First, we thank
the managers and students who helped us solidify our ideas about proper methods for
managing projects and proper ways of teaching the subject. Second, we thank the project
teams and leaders in all of our project management classes. We are especially grateful to
Margaret Sutton and Scott Shafer whose creative ideas, extensive skills with software,
and ability to sniff out inconsistenciessaved us countless hours of fumbling and potential
embarrassment. Last, but never least, we thank Suzanne Ingrao, editor nonpareil.
Special thanks are due those who have significantly influenced our thinking about
project management or supplied materials to help us write this book: Jeffrey Camm,
James Evans, Martin Levy, John McKinney and William Meyers, all of the University
of Cincinnati; Larry Crowley, Auburn University; Jeffrey Pinto, Pennsylvania State
University of Erie; Robert Riley, consultant; Gerhard Rosegger, Case Western Reserve
University; and the Staff of the Project Management Institute. We owe a massive debt of
gratitude to the reviewers for previous editions: Nicholas Aquilano, University of Arizona; Bud Baker, Wright State University; Robert J. Berger, University of Maryland;
Maj. Mark D. Camdle, Air Force Institute of Technology; Howard Chamberlin, Texas
A&M University; Desmond Cook, Ohio State University; Edward Davis, University of
Virginia; Kwasi Amoako-Gyampah, University of North Carolina, Greensboro;
Richard E. Gunther, California State University, Northridge; Jane E. Humble, Arizona
State University; Richard H. Irving, York University; Ted Klastorin, University of
Washington; Bill Leban, Keller Graduate School of Management; Barin Nag, Towson
University; John E. Nicolay, Jr., University of Minnesota; David L. Overbye, Keller
Graduate School of Management; David J. Robb, University of Calgary; Arthur C.

Rogers, City University, Washington; John Shanfi, DeVry Institute of Technology, Irving, Texas; Richard V. Sheng, DeVry Institute of Technology, San Marino, California;
Joyce T. Shirazi, University of Maryland University College; Herbert Spirer, University
of Connecticut; Jerome Weist, University of Utah; Burton Dean, San Jose State University; Samuel Taylor, University of Wyoming; William G. Wells, Jr., The George Washington University; and James Willman, University of Bridgeport.
For this edition, we thank these reviewers: Michael H. Ensby, Clarkson University; David L. Keeney, Stevens Institute of Technology; Abe Meilich, Walden University; Jaindeep Motwani, Grand Valley State University.

Jack Meredith
Broyhill Distinguished Scholar
and Chair in Operations
Babcock Graduate School of Management
Wake Forest University, P.O. Box 7659
Winston-Salem, NC 27 109

www.mba.wfu.edu

Samuel J. Mantel, Jr.,
Joseph S. Stern Professor Emeritus of Operations
Management
University of Cincinnati
608 Flagstaff Drive
Cincinnati, OH 45215



CHAPTER 1 Projects in Contemporary Organization

1

1.1 The Definition of a "Project"
8
1.2 Why Project Management?

11
1.3 The Project Life Cycle
13
1.4 The Structure of This Text
19
PROJECT MANAGEMENT I N PRACTICE
The Olympic Torch Relay Project
10
PROJECT MANAGEMENT I N PRACTICE
18
Demolishing San Francisco's Bridges Safely
READING: Lessons for an Accidental Profession

25

PROJECT INITIATION
CHAPTER 2 Strategic Management and Project Selection

37

2.1 Project Management Maturity
39
40
2.2 Project Selection and Criteria of Choice
2.3 The Nature of Project Selection Models
43
2.4 Types of Project Selection Models
46
2.5 Analysis under Uncertainty-The Management of Risk
2.6 Comments on the Information Base for Selection

75
2.7 Project Portfolio Process
78
2.8 Project Proposals
85
PROJECT MANAGEMENT IN PRACTICE
Implementing Strategy through Projects at Blue Cross/
40
Blue Shield

63


X

CONTENTS

PROJECT MANAGEMENT IN PRACTICE
53
Project Selection for Spent Nuclear Fuel Cleanup
PROJECT MANAGEMENT IN PRACTICE
63
Selecting a Composting Project at Larry's Markets
PROJECT MANAGEMENT IN PRACTICE
The Military Mobile Communication System-a Procurement
Innovation
88
CASE: Pan Europa Foods S.A.
97
READING: From Experience: Linking Projects to Strategy

CHAPTER 3 The Project Manager

3.1
3.2
3.3
3.4
3.5
3.6

106

118

120
Project Management and the Project Manager
128
Special Demands on the Project Manager
Selecting the Project Manager
140
Problems of Cultural Differences
145
150
Impact of Institutional Environments
Multicultural Communications and Managerial Behavior
157
PROJECT MANAGEMENT IN PRACTICE
126
The Project Management Career Path at AT&T
PROJECT MANAGEMENT IN PRACTICE
137

The Wreckmaster at a New York Subway Accident
PROJECT MANAGEMENT IN PRACTICE
Success at Energo by Integrating Two Diverse Cultures
149
PROJECT MANAGEMENT IN PRACTICE
154
Project Management in Brazil during Unstable Times
167
CASE: The National Jazz Hall of Fame
READING: What It Takes to Be a Good Project Manager
180

CHAPTER 4 Project Organization 185

4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8

The Project as Part of the Functional Organization
187
Pure Project Organization
191
The Matrix Organization
193
Mixed Organizational Systems

198
200
Choosing an Organizational Form
Two Special Cases-Risk Management and the Project Office
The Project Team
213
Human Factors and the Project Team
216
PROJECT MANAGEMENT IN PRACTICE
190
Reorganizing for Project Management at Prevost Car
PROJECT MANAGEMENT IN PRACTICE
Converting to Project Management in Government Agencies
PROJECT MANAGEMENT IN PRACTICE
South African Repair Success through Teamwork
221

206

205


CASE: Oilwell Cable Company, Inc.
READING: The Virtual Project:
Managing Tomorrow's Team Today

229
233

CHAPTER 5 Project Planning 239

5.1 Initial Project Coordination
241
249
5.2 Systems Integration
5.3 Sorting Out the Project
251
5.4 The Work Breakdown Structure and Linear Responsibility
260
Charts
5.5 Interface Coordination through Integration Management
266
PROJECT MANAGEMENT IN PRACTICE
Extensive Project Planning for Kodak's New Photographic
247
System
PROJECT MANAGEMENT IN PRACTICE
Disaster Project Planning in Iceland
259
CASE: A Project Management and Control System for Capital
Projects
276
READING: Planning for Crises in Project Management
286
CHAPTER 6 Conflict and Negotiation 295

6.1
6.2
6.3
6.4

6.5

The Nature of Negotiation
298
Partnering, Chartering, and Change
300
Conflict and the Project Life Cycle
304
Some Requirements and Principles of Negotiation
312
Neogtiation in Action-The Quad Sensor Project
315
PROJECT MANAGEMENT IN PRACTICE
Selling New Area Codes to Consumers Who Don't Want
Them
297
PROJECT MANAGEMENT IN PRACTICE
A Consensus Feasibility Study for Montreal's Archipel Dam
CASE: Pelican Landing: Bender Corporation
322
READING: Methods of Resolving Interpersonal Conflict

PROJECT IMPLEMENTATION

d

CHAPTER 7 Budgeting and Cost Estimation 333

7.1 Estimating Project Budgets
336

7.2 Improving the Process of Cost Estimation
347
PROJECT MANAGEMENT IN PRACTICE
Pathfinder Mission to Mars--on a Shoestring
335

1

31 1
326


xii

CONTENTS

PROJECT MANAGEMENT IN PRACTICE
347
Completing the Limerick Nuclear Facility Under Budget
PROJECT MANAGEMENT IN PRACTICE
362
Managing Costs at Massachusetts' Neighborhood Health Plan
366
CASE: Automotive Builders, Inc.: The Stanhope Project
372
READING: Three Perceptions of Project Cost

a

CHAPTER 8 Scheduling 379

8.1
8.2
8.3
8.4

Background
379
384
Network Techniques: PERT and CPM
412
Risk Analysis using Simulation with Crystal all@ 2000
Extensions and Applications
422
PROJECT MANAGEMENT IN PRACTICE
381
Replacing the Atigun Section of the Trans-Alaska Pipeline
PROJECT MANAGEMENT IN PRACTICE
Hosting the Annual Project Management Institute
Symposium
419
441
CASE: The Sharon Construction Corporation

CHAPTER 9 Resource Allocation 443

9.1
9.2
9.3
9.4

9.5
9.6
9.7

445
Critical Path Method-Crashing a Project
The Resource Allocation Problem
453
Resource Loading
45 5
Resource Leveling
457
Constrained Resource Scheduling
463
473
Multiproject Scheduling and Resource Allocation
Goldratt's Critical Chain
485
PROJECT MANAGEMENT IN PRACTICE
444
Expediting Los Angeles Freeway Repairs after the Earthquake
PROJECT MANAGEMENT IN PRACTICE
472
Benefits of Resource Constraining at Pennsylvania Electric
PROJECT MANAGEMENT IN PRACTICE
484
Minnesota DOT Ties Projects to Resources and Constraints
501
CASE: D.U. Singer Hospital Products Corp.

CHAPTER 10 Monitoring and Information Systems 505

10.1 The Planning-Monitoring-Controlling Cycle
508
517
10.2 Information Needs and the Reporting Process
10.3 Earned Value Analysis
523
10.4 Computerized PMIS (Project Management Information
Systems)
537


PROJECT MANAGEMENT IN PRACTICE
Using Project Management Software to Schedule the Olympic
Games
506
PROJECT MANAGEMENT IN PRACTICE
Tracking Scope Creep: A Project Manager Responds
516
PROJECT MANAGEMENT IN PRACTICE
Success through Earned Value at Texas Instruments
533
CASE: The Project Manager/Customer Interface
548
READING: Survey of Project Management Tools
552

CHAPTER 11 Project Control 559
11.1 The Fundamental Purposes of Control

562
11.2 Three Types of Control Processes
566
574
11.3 Comments on the Design of Control Systems
11.4 Control as a Function of Management
582
11.5 Balance in a Control System
585
11.6 Control of Creative Activities
588
11.7 Control of Change and Scope Creep
589
PROJECT MANAGEMENT I N PRACTICE
Extensive Controls for San Francisco's Metro Turnback
Project
564
PROJECT MANAGEMENT I N PRACTICE
Schedule and Cost Control for Australia's New Parliament
House
581
PROJECT MANAGEMENT IN PRACTICE
Better Control of Development Projects at Johnson Controls
CASE: Peerless Laser Processors
598
READING: Controlling Projects According to Plan
604

PROJECT TERMINATION

91 CHAPTER 12

Project Auditing 611

12.1 Purposes of Evaluation-Goals of the System
612
12.2 The Project Audit
616
12.3 Construction and Use of the Audit Report
619
12.4 The Project Audit Life Cycle
623
12.5 Some Essentials of an Audit/Evaluation
625
12.6 Measurement
628
PROJECT MANAGEMENT IN PRACTICE
Lessons from Auditing 110 Client/Server and Open Systems
615
Projects

592


xiv

CONTENTS

PROJECT MANAGEMENT IN PRACTICE
Auditing a Troubled Project at Atlantic States Chemical

Laboratories
622
READING: An Assessment of PostProject Reviews 634
CHAPTER 13 Project Termination 643

644
13.1 The Varieties of Project Termination
648
13.2 When to Terminate a Project
654
13.3 The Termination Process
661
13.4 The Final Report-A Project History
PROJECT MANAGEMENT IN PRACTICE
646
Nucor's Approach to Termination by Addition
PROJECT MANAGEMENT IN PRACTICE
Terminating the Superconducting Super Collider Project
EPILOGUE

Photo Credits
Name Index
Subject Index

668

673
675
682

Please visit http://www. wiley.co.yn/coIIe~e/pvojecgt for
Appendix A : Probability and Statistics and Appendix B:
Answers to the Even-Nuunbeved Problems.

653


Projects in Contemporary
Organizations

The past several decades have been marked by rapid growth in the use of project management as a means by which organizations achieve their objectives. Project management provides an organization with powerful tools that improve its ability to plan, implement, and control its activities as well as the ways in which it utilizes its people
and resources.
It is popular to ask, "Why can't they run government the way I run my business?"
In the case of project management, however, business and other organizations learned
from government, not the other way around. A lion's share of the credit for the development of the techniques and practices of project management belongs to the military, which faced a series of major tasks that simply were not achievable by tyaditional organizations operating in traditional ways. The United States Navy's ~ & l a r i s
program, NASA's Apollo space program, and more recently, the space shuttle and the
development of "smart" bombs and missiles are a few of the many instances of the
application of these specially developed management approaches to extraordinarily
complex projects. Following such examples, nonmilitary government sectors, private
industry, public service agencies, and volunteer organizations have all used project
management to increase their effectiveness.Almost all firms in the computer software
business routinely develop their output as projects or groups of projects.
Project management has emerged because the characteristics of our contemporary society demand the development of new methods of management. Of the many
forces involved, three are paramount: (1) the exponential expansion of human knowledge; (2) the growing demand for a broad range of complex, sophisticated, customized goods and services; and (3) the evolution of worldwide competitive markets
for the production and consumption of goods and services. All three forces combine
to mandate the use of teams to solve problems that used to be solvable by individuals.
These three forces combine to increase greatly the complexity of goods and services


2

CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

produced plus the complexity of the processes used to produce them. This, in turn,
leads to the need for more sophisticated systems to control both outcomes and
processes.
Forces Fostering Project Management
First, the expansion of knowledge allows an increasing number of academic disciplines to be used in solving problems associated with the development, production,
and distribution of goods and services. Second, satisfying the continuing demand for
more complex and customized products and services depends on our ability to make
product design an integrated and inherent part of our production and distribution systems. Third, worldwide markets force us to include cultural and environmental differences in our managerial decisions about what, where, when, and how to produce and
distribute output. The requisite knowledge does not reside in any one individual, no
matter how well educated or knowledgable. Thus, under these conditions, teams are
used for making decisions and taking action. This calls for a high level of coordination and cooperation between groups of people not particularly used to such interaction. Largely geared to the mass production of simpler goods, traditional organizational structures and management systems are simply not adequate to the task. Project
management is.
The organizational response to the forces noted above cannot take the form of an
instantaneous transformation from the old to the new. To be successful, the transition
must be systematic, but it tends to be slow and tortuous for most enterprises. Accomplishing organizational change is a natural application of project management, and
many firms have set up projects to implement their goals for strategic and tactical
change.
Another important societal force is the intense competition among institutions,
both profit and not-for-profit, fostered by our economic system. This puts extreme
pressure on organizations to make their complex, customized outputs available as
quickly as possible. "Time-to-market" is critical. Responses must come faster, decisions must be made sooner, and results must occur more quickly. Imagine the communications problems alone. Information and knowledge are growing explosively, but
the time permissible to locate and use the appropriate knowledge is decreasing.
In addition, these forces operate in a society that assumes that technology can do
anything. The fact is, this assumption is reasonably true, within the bounds of nature's
fundamental laws. The problem lies not in this assumption so much as in a concomitant assumption that allows society to ignore both the economic and noneconomic
costs associated with technological progress until some dramatic event focuses our attention on the costs (e.g., the Chernobyl nuclear accident, the Exxon Valdez oil spill,
or the possibility of global warming). At times, our faith in technology is disturbed by

difficulties and threats arising from its careless implementation, as in the case of industrial waste, but on the whole we seem remarkably tolerant of technological
change. For a case in point, consider California farm workers who waited more than
20 years to challenge a University of California research program devoted to the development of labor-saving farm machinery (Sun, 1984). The acceptance of technological advancement is so strong it took more than two decades to muster the legal at-


CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

3

tack. Consider also the easy acceptance of communication by e-mail and shopping on
the Internet.
Finally, the projects we undertake are large and getting larger. The modern advertising company, for example, advances from blanket print ads to regionally focused
television ads to personally focused Internet ads. As each new capability extends our
grasp, it serves as the base for new demands that force us to extend our reach even
farther. Projects increase in size and complexity because the more we can do, the
more we try to do.
The projects that command the most public attention tend to be large, complex,
multidisciplinary endeavors. Often, such endeavors are both similar to and different
from previous projects with which we may be more or less familiar. Similarities with
the past provide a base from which to start, but the differences imbue every project
with considerable risk. The complexities and multidisciplinary aspects of projects require that many parts be put together so that the prime objectives-performance, time
(or schedule), and cost-are met.

Three Project Objectives
While multimillion dollar, five-year projects capture public attention, the overwhelming majority of all projects are comparatively small-though nonetheless important to
doer and user alike. They involve outcomes, or deliverables, such as a new basketball
floor for a professional basketball team, a new insurance policy to protect against a
specific casualty loss, a new Web site, a new casing for a four-wheel drive minivan
transmission, a new industrial floor cleanser, the installation of a new method for
peer-review of patient care in a hospital, even the development of new software to

help manage projects. The list could be extended almost without limit. These undertakings have much in common with their larger counterparts. They are complex, multidisciplinary, and have the same general objectives-performance (or scope), time,
and cost.
There is a tendency to think of a project solely in terms of its outcome-that is,
its performance. But the time at which the outcome is available is itself a part of the
outcome, as is the cost entailed in achieving the outcome. The completion of ki building on time and on budget is quite a different outcome from the completion of the
same physical structure a year late or 20 percent over budget, or both.
Indeed, even the concept of performance or scope is more complex than is apparent. Much has been written in recent years arguing that, in addition to time, cost, and
specifications, there is a fourth dimension to be considered. This fourth dimension is
the expectations of the client (see Darnell, 1997), which sometimes tend to increase
as the project progresses, known as "scope creep" (see Chapter 11). However, we feel
strongly that the expectations of the client are not an additional target, but an inherent
part of the project specij?cations. To consider the client's desires as different from the
project specifications is to court conflict between client and project team, each of
whom has unique ideas about the deliverables' nature. Also, to separate client desires
from project specifications creates conflict because client and team rarely act in concert. The client specifies a desired outcome. Then the project team designs and implements the project. Then the client views the result of the team's ideas. Given the


4

CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

creative juices of human beings, there is little chance of unchanged specifications
during the process. The project manager never wins when such a conflict arises. To be
acceptable to the client, a building must meet the client's expectations as well as those
of the builder, which may require more than slavish conformity to the builder's blueprints. There are quality, safety, esthetic, and environmental dimensions to performance that cannot be overlooked if the project is to meet its goals. The expectations
of client and project team should be integrated throughout the entire project.
In a more basic sense, the project manager, the project team, senior management,
the client, and anyone else with a stake in the project, is interested in making a success of the project. The problem is that not all parties-at-interest have the same idea of
what constitutes success. In a thoughtful piece of research that we will consider in
more detail in Chapter 12, Shenhar, Levy, and Dvir (1997) have concluded that project success has four dimensions: project efficiency, impact on the customer, the business impact on the organization, and opening new opportunities for the future. We

agree with their assessment, but again argue that all of these elements of success must
be contained in the "specifications" of the project. The specifications of the project
are no more and no less than the set of objectives the project is meant to deliver to all
its stakeholders.
The prime objectives of project management are shown in Figure 1-1, with the
specified project objectives on the axes. This illustration implies that there is some
"function" (not shown in the figure) that relates them, one to another-and so there
is! Although the functions vary from project to project, and from time to time for a
given project, we will be constantly referring to these relationships, or trade-offs,
throughout this book. The primary task of the project manager is to manage these
trade-offs.

t

Performance

1 Required performance

1

Due date

Time
Jascheduien)

Figure 1-1 Project targets-performance, cost, time.


CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

5

The Project Manager
While managing the trade-offs, the project manager (PM) is expected to integrate all
aspects of the project, ensure that the proper knowledge and resources are available
when and where needed, and above all, ensure that the expected results are produced
in a timely, cost-effective manner.
The complexity of the problems faced by the PM, taken together with the rapid
growth in the number of project-oriented organizations, has contributed to the professionalization of project management. The Project Management Institute (PMI)
was established in 1969. By 1990, the PMI had 7,500 members. Five years later, it
had grown to over 17,000, and by the end of 2001 it had exploded to 86,000 (see Figure 1-2). This exponential growth is indicative of the rapid growth in the use of
projects, but also reflects the importance of the PMI as a force in the development of
project management as a profession. Its mission is to foster the growth of project
management as well as "building professionalism" in the field. The Project Management Journal and PM Network magazines were founded by the PMI to communicate
ideas about project management, as well as solutions for commonly encountered
problems. Another PMI objective is to codify the areas of learning required for
competent project management. This project management body of knowledge,
PMBOK, is meant to serve as the fundamental basis for education for project managers (Project Management Institute, 2001). The profession has flourished, with the
result that many colleges and universities offer training in project management and
some offer specialized degree programs in the area.

Year

Figure 1-2 Project Management
Institute growth history.


Clearly, rapid growth in the number of project managers and of the PMI membership were the result, not the cause, of tremendous growth in the number of projects
being carried out. The software industry alone has been responsible for a significant
percent of the growth. Another major source of growth has been the need to control

project activity in large organizations. As the number of nonroutine activities increases in an organization, there is an increased need in senior management to understand and control the system. Project management, with its schedules, budgets, due
dates, risk assessments, statements of expected outcomes, and people who take responsibility, is a way to meet this need. These forces have combined and led to the
creation of a project-organized firm. Much more will be said about project-oriented
organizations in Chapter 4.
As we note in the coming chapters, the project manager's job is not without problems. There is the ever-present frustration of being responsible for outcomes while
lacking full authority to command the requisite resources or personnel. There are the
constant problems of dealing with the parties involved in any project-senior management, client, project team, and public-all of whom seem to speak different
languages and have different objectives. There are the ceaseless organizational and
technical "fires to be fought." There are vendors who cannot seem to keep "lightningstrike-me-dead promises about delivery dates. This list of troubles only scratches the
surface.
Difficult as the job may be, most project managers take a considerable amount of
pleasure and job satisfaction from their occupation. The challenges are many and the
risks significant, but so are the rewards of success. Project managers usually enjoy organizational visibility, considerable variety in their day-to-day duties, and often have
the prestige associated with work on the enterprise's high-priority objectives. The
profession, however, is not one for the timid. Risk and conflict avoiders do not make
happy project managers. Those who can stomach the risks and enjoy practicing the
arts of conflict resolution, however, can take substantial monetary and psychological
rewards from their work.

Recent Changes in Managing Organizations
In the almost two decades since the first edition of this book was published, the
process of managing organizations has been impacted by three revolutionary changes.
First, we have seen an accelerating replacement of traditional, hierarchical management by consensual management. Second, we are currently witnessing the adoption
of the "systems approach (sometimes called "systems engineering") to deal with organizational or technological problems because it is abundantly clear that when we
act on one part of an organization or system, we are certain to affect other parts.
Third, we have seen organizations establishing projects as the preferred way to accomplish their goals. Examples vary from the hundreds of projects required to accomplish the "globalization" of a multibillion dollar household products firm to the incremental tailoring of products and services for individual customers. We elaborate on
this tie between the organization's goals and the projects it selects for implemention
in the following chapter. And as we will note in Chapter 4 and elsewhere, there has
been a rapid and sustained growth in the number of organizations that use projects to

CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

7

accomplish almost all of the nonroutine tasks they undertake. While all three of these
phenomena have been known for many years, it is comparatively recent that they have
been widely recognized and practiced.
In his fascinating book, Rescuing Prometheus (Hughes, 1998), technology historian Thomas Hughes examines four large-scale projects that required the use of a
nontraditional management style, a nontraditional organizational design, and a nontraditional approach to problem solving in order to achieve their objectives. These
huge projects-Semiautomatic Ground Environment (SAGE) air defense system, the
Atlas Intercontinental Ballistic Missile, the Boston Central ArteryITunnel, and the
Department of Defense Advanced Research Projects Agency's Internet (ARPANET)were all characterized by extraordinarily diverse knowledge and information input requirements." The size and technological complexity of these projects required input
from a large number of autonomous organizations-governmental, industrial, and
academic-that usually did not work cooperatively with other organizations, were
sometimes competitors, and could be philosophical andlor political opponents. Further, any actions taken to deal with parts of the total project often had disturbing impacts on many other parts of the system.
Obviously, these projects were not the first, complex, large-scale projects carried out in this country or elsewhere. For example, the Manhatten Project-devoted
to the development of the atomic bomb-was such a project. The Manhatten Project, however, was the sole and full-time work for a large majority of the individuals
and organizations working on it. The organizations contributing to the projects
Hughes describes were, for the most part, working on many other tasks. For example, Massachusetts Institute of Technology (MIT), the Pentagon, IBM, Bell Labs
(now Lucent Technologies), RAND Corporation, the Massachusetts Department of
Highways, and a great many other organizations were all highly involved in one or
more of these projects while still carrying on their usual work. The use of multiple
organizations (both within and outside of the sponsoring firm) as contributors to a
project is no longer remarkable. Transdisciplinary projects are more the rule than
the exception.
These revolutions and modifications in the style of management and organization
of projects will be reflected throughout this book. For example, we have come to believe that the use of a traditional, hierarchical management style rather than a consensual style to manage multiorganizational projects is a major generator of conflict between members of the project team. We have long felt, and are now certain, that
staffing multidisciplinary projects with individuals whose primary focus is on a specific discipline rather than on the problem(s) embodied in the project will also lead to
high levels of interpersonal conflict between project team members. In Chapter 4 we

will discuss some issues involved in the widespread use of projects to accomplish organizational change. As in the first edition, we adopt a systems approach to dealing
with the problems of managing projects.

*Hughes's term for this is "transdisciplinary" (across disciplines), which is rather more accurate than the
usual "interdisciplinary" (between discliplines).


CHAPTER 1 / PROJECTS IN CONTEMPORARY ORGANIZATIONS

7

accomplish almost all of the nonroutine tasks they undertake. While all three of these
phenomena have been known for many years, it is comparatively recent that they have
been widely recognized and practiced.
In his fascinating book, Rescuing Prometheus (Hughes, 1998), technology historian Thomas Hughes examines four large-scale projects that required the use of a
nontraditional management style, a nontraditional organizational design, and a nontraditional approach to problem solving in order to achieve their objective~.These
huge projects-Semiautomatic Ground Environment (SAGE) air defense system, the
Atlas Intercontinental Ballistic Missile, the Boston Central ArteryITunnel, and the
Department of Defense Advanced Research Projects Agency's Internet (ARPANET)were all characterized by extraordinarily diverse knowledge and information input requirements." The size and technological complexity of these projects required input
from a large number of autonomous organizations-governmental, industrial, and
academic-that usually did not work cooperatively with other organizations, were
sometimes competitors, and could be philosophical andlor political opponents. Further, any actions taken to deal with parts of the total project often had disturbing impacts on many other parts of the system.
Obviously, these projects were not the first, complex, large-scale projects carried out in this country or elsewhere. For example, the Manhatten Project-devoted
to the development of the atomic bomb-was such a project. The Manhatten Project, however, was the sole and full-time work for a large majority of the individuals
and organizations working on it. The organizations contributing to the projects
Hughes describes were, for the most part, working on many other tasks. For example, Massachusetts Institute of Technology (MIT), the Pentagon, IBM, Bell Labs
(now Lucent Technologies), RAND Corporation, the Massachusetts Department of
Highways, and a great many other organizations were all highly involved in one or
more of these projects while still carrying on their usual work. The use of multiple
organizations (both within and outside of the sponsoring firm) as contributors to a

project is no longer remarkable. Transdisciplinary projects are more the rule than
the exception.
These revolutions and modifications in the style of management and organization
of projects will be reflected throughout this book. For example, we have come to believe that the use of a traditional, hierarchical management style rather than a consensual style to manage multiorganizational projects is a major generator of conflict between members of the project team. We have long felt, and are now certain, that
staffing multidisciplinary projects with individuals whose primary focus is on a specific discipline rather than on the problem(s) embodied in the project will also lead to
high levels of interpersonal conflict between project team members. In Chapter 4 we
will discuss some issues involved in the widespread use of projects to accomplish organizational change. As in the first edition, we adopt a systems approach to dealing
with the problems of managing projects.

*Hughes's term for this is "transdisciplinary" (across disciplines), which is rather more accurate than the
usual "interdisciplinary" (between discliplines).


This book identifies the specific tasks facing PMs. We investigate the nature of
the projects for which the PM is responsible, the skills that must be used to manage
projects, and the means by which the manager can bring the project to a successful
conclusion in terms of the three primary criteria: performance, time, and cost. Before
delving into the details of this analysis, however, we clarify the nature of a project and
determine how it differs from the other activities that are conducted in organizations.
We also note a few of the major advantages, disadvantages, strengths, and limitations
of project management. At this end of this chapter, we describe the approach followed
throughout the rest of the book.

1.1 THE DEFINITION OF A "PROJECT"
The PMI has defined a project as "A temporary endeavor undertaken to create a
unique product or service" (Project Management Institute, 2001, p. 167). There is a
rich variety of projects to be found in our society. Although some may argue that the
construction of the Tower of Babel or the Egyptian pyramids were some of the first
"projects," it is probable that cavemen formed a project to gather the raw material for
mammoth stew. It is certainly true that the construction of Boulder Dam and Edison's

invention of the light bulb were projects by any sensible definition. Modern project
management, however, is usually said to have begun with the Manhattan Project. In
its early days, project management was used mainly for very large, complex research
and development (R & D) projects like the development of the Atlas Intercontinental
Ballistic Missile and similar military weapon systems. Massive construction programs were also organized as projects-the construction of dams, ships, refineries,
and freeways, among others.
As the techniques of project management were developed, mostly by the military,
the use of project organization began to spread. Private construction firms found that
project organization was helpful on smaller projects, such as the building of a warehouse or an apartment complex. Automotive companies used project organization to
develop new automobile models. Both General Electric and Pratt & Whitney used
project organization to develop new jet aircraft engines for airlines, as well as the Air
Force. Project management has even been used to develop new models of shoes and
ships (though possibly not sealing wax). More recently, the use of project management by international organizations, and especially organizations producing services
rather than products, has grown rapidly. Advertising campaigns, global mergers, and
capital acquisitions are often handled as projects, and the methods have spread to the
nonprofit sector. Teas, weddings, scout-o-ramas, fund drives, election campaigns, parties, and recitals have all made use of project management. Most striking has been the
widespread adoption of project management techniques for the development of computer software.
In discussions of project management, it is sometimes useful to make a distinction between terms such as project, program, task, and work packages. The military,
source of most of these terms, generally uses the term program to refer to an exceptionally large, long-range objective that is broken down into a set of projects. These
projects are divided further into tasks, which are, in turn, split into work packages that


1.1 THE DEFINITION OF A "PROJECT"

9

are themselves composed of work units. But exceptions to this hierarchical nomenclature abound. The Manhattan Project was a huge "program," but a "task force" was
created to investigate the many potential futures of a large steel company.
In the broadest sense, a project is a specific, finite task to be accomplished.
Whether large- or small-scale or whether long- or short-run is not particularly relevant. What is relevant is that the project be seen as a unit. There are, however, some

attributes that characterize projects.

Purpose
A project is usually a one-time activity with a well-defined set of desired end results.
It can be divided into subtasks that must be accomplished in order to achieve the project goals. The project is complex enough that the subtasks require careful coordination and control in terms of timing, precedence, cost, and performance. Often, the
project itself must be coordinated with other projects being carried out by the same
parent organization.

Life Cycle
Like organic entities, projects have life cycles. From a slow beginning they progress
to a buildup of size, then peak, begin a decline, and finally must be terminated. (Also
like organic entities, they often resist termination.) Some projects end by being
phased into the normal, ongoing operations of the parent organization. The life cycle
is discussed further in Section 1.3 where an important exception t~ the usual description of the growth curve is mentioned.

Interdependencies
Projects often interact with other projects being carried out simultaneously by their
parent organization; but projects always interact with the parent organization's standard, ongoing operations. Although the functional departments of an organization
(marketing, finance, manufacturing, and the like) interact with one another in regular,
patterned ways, the patterns of interaction between projects and these departments
tend to be changeable. Marketing may be involved at the beginning and end of a project, but not in the middle. Manufacturing may have major involvement throughout.
Finance is often involved at the beginning and accounting (the controller) at the end,
as well as at periodic reporting times. The PM must keep all these interactions clear
and maintain the appropriate interrelationships with all external groups.

Uniqueness
Every project has some elements that are unique. No two construction or R & D projects are precisely alike. Though it is clear that construction projects are usually more
routine than R & D projects, some degree of customization is a characteristic of projects. In addition to the presence of risk, as noted earlier, this characteristic means that
projects, by their nature, cannot be completely reduced to routine. The PM's importance is emphasized because, as a devotee of management by exception, the PM will
find there are a great many exceptions to manage by.